Rio Tinto mulls $300M writedown as uranium mine expansion cancelled

Flooded mine pits at the Ranger uranium mine, in Kakadu National Park, 2011.

Mining giant Rio Tinto (LON, ASX:RIO) is contemplating to take a writedown of about $300 million after its subsidiary Energy Resources of Australia (ASX:ERA) decided to cancel plans to expand a uranium mine.

ERA, in which Rio has a 68.4% stake, said on Thursday that it would not proceed with the final feasibility study of its Ranger 3 Deeps uranium project in Australia’s Northern Territory, citing weak market conditions.

The decision underscores the ongoing strains in the nuclear industry following the Fukushima meltdown in 2011, which prompted Japan to mothball its 43 operable reactors, causing uranium prices to drop as a result of a worldwide supply glut.

ERA shares collapsed on the news, closing more than 48% down Friday at 6.25 Australian cents.

Operations ceased at Ranger in 2011 and the underground expansion project was the only hope of future mining at the site. Since then ERA has been processing ore from existing stockpiles.

The firm had A$293.3m cash and cash equivalents on its balance sheet as of the end of December 2014.

Despite holding about a third of the world’s known uranium resources, Australia only supplies 11% of the global needs